Measuring a Nation's Income: Gross Domestic Product (GDP)
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Questions and Answers

What is Gross Domestic Product (GDP) a measure of?

  • The total value of goods and services exported
  • The total income for everyone in the country (correct)
  • The total value of intermediate goods produced
  • The total value of goods and services imported

    • What is the GDP identity?

  • Y = C + I - G + NX
  • Y = C - I + G + NX
  • Y = C + I + G + NX (correct)
  • Y = C - I - G + NX

    • What is consumption in the context of GDP?

  • Government spending on goods and services
  • Household spending on goods and services (correct)
  • Export of goods and services
  • Business spending on capital goods

    • What is investment in the context of GDP?

    <p>Purchase of capital goods that will be used to produce other goods and services</p> Signup and view all the answers

    What is the difference between nominal GDP and real GDP?

    <p>Nominal GDP is valued at current prices, while real GDP is valued at constant prices</p> Signup and view all the answers

    What does the GDP deflator measure?

    <p>The level of prices relative to the base year</p> Signup and view all the answers

    What is inflation?

    <p>An increase in the overall price level</p> Signup and view all the answers

    What is the Consumer Price Index (CPI)?

    <p>A measure of the overall level of prices of goods and services bought by a typical consumer</p> Signup and view all the answers

    What is a limitation of GDP as a measure of economic well-being?

    <p>All of the above</p> Signup and view all the answers

    What is a characteristic of a country with a high GDP per person?

    <p>Better life expectancy, literacy, and internet usage</p> Signup and view all the answers

    What is the main purpose of the CPI?

    <p>To measure the cost of living</p> Signup and view all the answers

    What is the main difference between the CPI and the GDP deflator?

    <p>CPI measures prices of goods and services bought by consumers, while GDP deflator measures prices of all goods and services produced</p> Signup and view all the answers

    What is the natural rate of unemployment?

    <p>The rate of unemployment that is naturally around 5%</p> Signup and view all the answers

    What is the effect of minimum-wage laws on the labor market?

    <p>Decrease employment</p> Signup and view all the answers

    What is the main determinant of living standards?

    <p>Productivity</p> Signup and view all the answers

    What is the benefit of education on the economy?

    <p>Increase productivity</p> Signup and view all the answers

    What is the catch-up effect in economic growth?

    <p>Poor countries tend to grow more rapidly than rich countries</p> Signup and view all the answers

    What is the main effect of investment on economic growth?

    <p>Increase productivity</p> Signup and view all the answers

    What is the role of property rights in economic growth?

    <p>Increase economic growth</p> Signup and view all the answers

    What is the effect of inward-oriented policies on economic growth?

    <p>Decrease economic growth</p> Signup and view all the answers

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